Graeber and Debt (4)
In the context of the development of money, Graeber notes that the unit that debts are recorded in does not matter, provided everyone understands it and uses it. He describes how pounds shillings and pence were used as units of account in Western Europe hundreds of years after these coins had stopped circulating. Coins in these denominations did not exist, but people still used these units for recording debts and other market valuations.The period began much as it did elsewhere with the disappearance of coinage. Money retreated into virtuality. Everyone continued to calculate costs in Roman currency, then, later in Carolingian “imaginary money”= the purely conceptual system of pounds, shillings and pence used across Western European to keep accounts well into the seventeenth century. (Graeber p.283)
Trust within a community is important for the development of money. Another interesting comment is the following quote.
Within a community- a town, a city, a guild or religious society-pretty much anything could function as money, provided everyone know there was some willing to accept it to cancel out a debt (Graeber p.74).A debt is just an exchange that has not been brought to completion. (Graeber p.121)
This is not quite right. Debt is a complete exchange, of the ability to buy goods in the present for payments of interest in the future. I make a different point in Trade. Money indicates an exchange that has not been brought to completion.
4 comments:
I think he is very wrong here. The coins may not have existed but the metal upon which they were based was. Everyone knew how much metal was used in a pound, and that amount held a value over the years upon which people could bank on.
No fiat currency keeps its value well enough, so, as we've been seeing, the debt system we've built on top of it is starting to fall apart. Plus we've generated other assets, debt-backed assets- like mortgage backed assets that also don't keep their value. Graeber's proposal would lead us further down this rathole.
August, I agree that fiat money tends to lose value, because politicians cannot resist temptation to abuse their powers. I am not an advocate of Graeber's, approach, although it is not very clearly stated.
I put the quote here, because I am interested in the way that people used an archaic unit of account to value goods and services. I do not think that they translated back to gold. The average person would have no idea what a pound of gold looked like. They were They were able to use these obsolete units of account, because they could see lots of goods and services being offered for sale using them to specify the price, so they know what they could buy in their own community.
The point of my Beeble parable is that local communities can create workable money without using gold and without depending on the fiat power of the state. Graeber’s account supports my view, even if he does not.
This reminds me of bitcoin (http://bitcoin.org/).
I like the sentiment, and I think they've handled some of the weaknesses that you point out the beeble would have, but there isn't any inherent value in a bitcoin either. It will be interesting to see if they can establish themselves for the long haul.
I am all for innovation, but a currency with no inherent market value has yet to prove itself long term.
August
When you say that a currency with no inherent market value has yet to prove itself long term” your are right. All fiat currencies get devalued.
Yet modern currencies have done very well despite the actions of governments. The reason is that we forget how much that currency is a social construct. People do no use American dollars because the US Gov decrees it. Oddly, you probably cannot go into the IRS and pay your taxes with cash. People hold onto US dollars despite the government and the fed, because they know that the rest of their society will accept them in exchange for goods and services. They trust the currency, because they trust the people and businesses around them, not because they trust the decrees of the government.
When I left the US after a visit, I kept a couple of $US100 notes, even though the US government has no authority over me. I kept them because I trusted the American people to accept them in exchange the next time I visited (and because the currency in my own country would devalue just as much).
Money is much more of a social construct than a fiat creation. Social acceptance is much more important than inherent market value, or government fiat.
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